AIN NASIR, Iraq, Oct 30 (Reuters) - Gun trucks and humvees streamed north on a highway heading to Mosul on Sunday flying the banners of Shi'ite militias along with Iraqi flags while blaring religious songs.

The convoys were the first clear sign of a new player on the battlefield in the U.S.-backed offensive to retake Mosul from Islamic State: Hashid Shaabi or Popular Mobilization Forces (PMF), a coalition of Shi'ite militias.

Although it reports officially to Prime Minister Haider al-Abadi, the coalition is mostly made up of groups trained by Iran and loyal to its Supreme Leader, Ayatollah Ali Khamenei.

They have close ties with General Qassem Soleimani, the commander of Iran's Quds Brigade, the extra-territorial arm of Iran's Revolutionary Guards. He was seen touring the frontlines around Mosul last week.

Among the banners that could be seen flying from artillery cannons, communication towers and buildings recently retaken from Islamic State were those of Kataib Hezbollah and Asaib Ahl al-Haq, two of the main Iranian-backed groups, alongside the Badr Organization, considered the largest.

Dozens of holes dug on the side of the highway for several kilometres indicated how heavily mined the highway had been only a couple of days before and the efforts the force had gone through to clear the road.

One of the first villages retaken by the PMF since announcing combat operations on Saturday was Ain Nasir, some 30 kilometres south of Mosul.

One fighter who participated in the battle to retake the village on Saturday night said that Islamic State had put up little resistance and that fighters had taken several villagers hostage during their retreat, using them as human shields.

"We are fighting to push Daesh out of Iraq," said Adel Khiali, 26, a PMF fighter affiliated with the Badr Organization who was formerly an Iraqi army soldier. Daesh is an Arabic acronym for Islamic State.

MORTAR FIRE

The Iraqi army and federal police came in to help clear the area after the PMF, Khiali said.

Still, as Khiali spoke, at least one mortar round hit the village, indicating that the area was not yet secure.

There was a sense of resentment among some fighters on the battlefield on Sunday that the PMF have been misrepresented and that their sacrifices have not been appreciated.

"We fight to help people return to their villages and they call us militias," said Ali Khiali, a 40- year old PMF fighter affiliated with the Badr Organization. "Is that fair?"

Adel and Ali Khiali are brothers.

The U.N in July said it had a list of more than 640 Sunni Muslim men and boys reportedly abducted by Shi'ite militiamen in Falluja, a former militant stronghold west of Baghdad, and about 50 others who were summarily executed or tortured to death.

Abadi's Shi'ite-led government and the PMF say a limited number of violations had occurred and were investigated, but they deny abuses were widespread and systematic.

But Amnesty International says that in previous campaigns, the Shi'ite militias have committed "serious human rights violations, including war crimes" against civilians fleeing Islamic State-held territory.

The flying of Shi'ite flags by the militias and also some regular army and police units in the mostly Sunni region around Mosul has been a cause of concern for local officials.

But the Popular Mobilization forces have not been linked to any sectarian incidents so far in the campaign that started on Oct 17 with air and ground support from the U.S.-led coalition.

"It's not right what they say about us," Adel said. "When they call us militias it's like they are insulting us."

Though Sunday was only the second day that the PMF had officially joined the battle against Islamic State, the banners and slogans of the organization made it clear that theirs is a pan-Shi'ite cause that may not end at Iraq's borders.

Tens of thousands of Iraqi Shi'ite militia fighters have crossed the border to fight on behalf of the government of President Bashar al-Assad with backing from Iran, but the PMF is not officially involved in the fighting there.

This could change after Mosul. The Shi'ite paramilitary coalition said it plans to fight then alongside Assad's forces.

"We are fully ready to go to any place that contains a threat to Iraqi national security," Ahmed al-Asadi, a PMF spokesman, told a news conference in Baghdad on Saturday, mentioning Syria as the main "arena" for the fighting.

Black graffiti on the wall of an office of the Badr Organization in Qayyara on Sunday read: "Baghdad to the gates of Damascus."

A few kilometers away on the highway between Qayyara and Mosul, a stall serving food to PMF fighters had a large portrait of Sheikh Nimr Baqer Nimr, the Saudi Shi'ite cleric executed by the Saudi government in January, outside.

Several checkpoints and vehicles were also adorned with portraits of Khamenei, Iran's supreme leader. (Editing by Clelia Oziel)